Tuesday, 14 October 2008

Last week the Pope was busy telling us that money is an illusion, that "money disappears, it's nothing" (a fair point, you might think given the current crisis, but not when Papal logic leads to this argument: "Whoever builds his life on this reality, on material things, on success ... builds his house on sand. Only the word of God is the foundation of all reality").

But Pope Benny would say that, safe in the knowledge that his own cash (the Vatican's got loads of it, even if it is an illusion) is sitting pretty in the Institute for the Works of Religion, the Vatican's very own bank, which has just announced that all its deposits are safe from the effects of the global banking crash. Fair play to them, in that they seem to have stayed away from the reckless tactics that have landed other banks in trouble, but could they please clarify, given their rumoured $4bn in deposits, whether money is an illusion or not? I'm confused and in need of Papal guidance.

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On Thursday, September 25, Washington Mutual voluntarily filed for Chapter 11 bankruptcy protection. It was the largest bank in the history of the United States to fail. Personally, I was shocked to see such a large and well known business go into an economic failure. The Federal Deposit Insurance Corporation apprehended the struggling savings and loan’s assets and the company went into receivership. This could have been a disastrous turn of events for America’s economy. "Consumer watchdogs" who speak badly of payday cash advance lenders would run off with their tails between their legs. J. P. Morgan Chase came in to buy WaMu out at the last minute, but the portentous warning signs still remain. Is this going to be the fate of more large banks in the future? What would have happened if J. P. Morgan Chase hadn’t bought WaMu and the FDIC had had to pay customers back because of their guarantee? That would have meant up to $100,000 per individual and $200,000 per joint account, as well as $250,000 for IRAs and so on. Many economists fear that such a bailout would have sapped at least half of the FDIC’s reserves, which would definitely not look good for our economy if more banks were to fail. Much of this can be attributed to many banks who have probed too greedily and too deep into the depths of the subprime home lending market. While some fear we'll go even deeper into the dilemma, others think the problem will fix itself. In times like these, payday loans can be a small, good thing for consumers in search of short-term relief that banks can't give.